Turn £800 into £5,500 for your Retirement

If you haven’t already heard, you could potentially boost your state pension if you’re aged between 47-70. But you only have until the 5th April 2023 to do so.

What is this all about?

Martin Lewis, the money saving expert, recently explained how some people might be entitled to boost their pensions but topping up your entitlement and potentially turning £800 into £5,500.

You normally need to have 35 years’ worth of qualifying National Insurance contributions to get the full new state pension, which is currently worth £185.15 a week and can be claimed by anyone who has reached state pension age before the 6th April 2016. 

Lewis he has identified a process to boost this by buying extra NI years.

How do you do it?

During your working years you will have built up NI credits which qualify you for your state pension.

However, if you had to take time away from your job, you might have gaps in this record.

You can currently buy years to fill in those gaps, back to 2006, but these rules are changing from the 5th April 2023.

After this you can only go back 6 years’ worth of NI contributions.

How much does it cost?

A full voluntary NI year costs roughly £800, but it will add an extra £275 each year to your state pension.

How much can you ‘make’?

Lewis explained: “If a man who’s reached age 66 lives the typical 19 more years, a woman 21 more years, then for each £800 spent, a man can expect to get £5,300 extra pension, a woman £5,800”. However, this amount will vary depending on your individual circumstances.

The state pension currently has a triple lock which means it rises with the highest of inflation, 2.5% or average earnings. 

Some maybe be entitled to free NI credits

Certain people may qualify for these additional NI credits for free, so it is worth checking before making any purchases. 

An example of those entitled are those who claimed statutory sick pay and did not earn enough for a qualifying year, and those who claim benefits such as Jobseeker’s Allowance and Employment and Support allowance. 

You can check whether you’re eligible on the government website.

Is it worth it for everyone?

Some people wouldn’t benefit from purchasing extra NI credits, such as those likely to be on a low income and solely rely on their state pension, as pension credit may top up their income automatically.

You should also check whether the gains from purchasing extra years may be reduced if it pushes you into the higher 40% tax bracket. 

You can check how much state pension you’re likely to get by using the government’s state pension forecast calculator.

You can also contract the free Future Pension Centre on 0800 7310 0175 before making any purchases to check if you’d benefit.

How do you buy additional NI years?

If you’re certain it will benefit you, you will need to contact HMRC to get a reference number, and then pay for your credits through your bank or building society to HMRC.

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